Vanguard Natural Resources Reports Record Adjusted EBITDA, Production and Proved Reserves for 2012 a
Vanguard Natural Resources Reports Record Adjusted EBITDA, Production and Proved Reserves for 2012 and 2013 Guidance
HOUSTON--(BUSINESS WIRE)-- Vanguard Natural Resources, LLC (NYS: VNR) ("Vanguard" or "the Company") today reported financial and operational results for the full year and fourth quarter ended December 31, 2012.
Mr. Scott W. Smith, President and CEO, commented, "We had a very busy year in 2012 as we closed almost $800 million in acquisitions and expanded our operating presence into new areas upon which we can continue to build in the future. In addition, with the announcement of the Range Permian acquisition, we are well on our way to having a successful 2013 on the acquisition front. Deal flow continues to be encouraging and with the liquidity we generated through our recent bond and equity offerings we have ample financial resources to be opportunistic. We are also proud that we delivered another year of increased distributions per unit to our unitholders and look forward to continuing this trend as we focus on growing the Company on their behalf."
Selected Financial Information
A summary of selected financial information follows. For consolidated financial statements, please see accompanying tables.
Three Months Ended | Year Ended December 31, | |||||||||||||||||||
2012 | 2011(1) | 2012 | 2011(1) | |||||||||||||||||
($ in thousands, except per unit data) | ||||||||||||||||||||
Production (BOE/d) | 22,803 | 13,686 | 18,298 | 13,405 | ||||||||||||||||
Oil, natural gas and natural gas liquids sales | $ | 82,327 | $ | 86,003 | $ | 310,356 | $ | 312,842 | ||||||||||||
Realized gain on commodity derivative contracts | $ | 1,712 | $ | 5,038 | $ | 956 | $ | 7,205 | ||||||||||||
Unrealized gain (loss) on commodity derivative contracts | $ | 26,647 | $ | (69,095 | ) | $ | 35,890 | $ | (470 | ) | ||||||||||
Operating expenses | $ | 27,817 | $ | 27,286 | $ | 103,735 | $ | 92,565 | ||||||||||||
Selling, general and administrative expenses | $ | 7,168 | $ | 3,342 | $ | 22,466 | $ | 19,779 | ||||||||||||
Depreciation, depletion, amortization, and accretion | $ | 30,645 | $ | 22,060 | $ | 104,542 | $ | 84,857 | ||||||||||||
Impairment of oil and natural gas properties | $ | 229,693 | $ | - | $ | 247,722 | $ | - | ||||||||||||
Net income (loss) attributable to Vanguard unitholders | $ | (201,511 | ) | $ | (15,208 | ) | $ | (168,815 | ) | $ | 62,063 | |||||||||
Adjusted net income attributable to Vanguard unitholders (2) | $ | 15,978 | $ | 27,575 | $ | 64,131 | $ | 74,046 | ||||||||||||
Adjusted net income per basic unit attributable to Vanguard unitholders (2) | $ | 0.27 | $ | 0.76 | $ | 1.18 | $ | 2.33 | ||||||||||||
Adjusted EBITDA attributable to Vanguard unitholders (2) | $ | 66,547 | $ | 53,498 | $ | 230,512 | $ | 164,603 | ||||||||||||
Interest expense, including realized losses on interest rate derivative contracts | $ | 15,248 | $ | 8,562 | $ | 44,406 | $ | 31,868 | ||||||||||||
Drilling, capital workover and recompletion expenditures | $ | 10,120 | $ | 10,367 | $ | 50,405 | $ | 34,096 | ||||||||||||
Distributable cash flow (2) | $ | 41,179 | $ | 37,083 | $ | 141,223 | $ | 110,082 | ||||||||||||
Distributable cash flow per basic unit (2) | $ | 0.70 | $ | 0.76 | $ | 2.60 | $ | 2.26 | ||||||||||||
Distribution coverage (2) | 1.15 | x | 1.39 | x | 1.08 | x | 1.40 | x | ||||||||||||
(1) | The operating results and production of the subsidiaries we acquired in the ENP Purchase through the date of the completion of the ENP Merger on December 1, 2011 were subject to a 53.4% non-controlling interest. | |
(2) | Non-GAAP financial measures. Please see Adjusted Net Income, Adjusted EBITDA and Distributable Cash Flow tables at the end of this press release for a reconciliation of these measures to their nearest comparable GAAP measure. | |
2013 Guidance
Summary of Estimates
The following table sets forth certain estimates being used by Vanguard to model its anticipated results of operations for the fiscal year ending December 31, 2013 and includes the impact from the recently closed acquisition of natural gas and liquids properties in the Piceance Basin in Colorado and Powder River and Wind River Basins in Wyoming, but DOES NOT include the pending acquisition of properties in the Permian Basin from Range Resources Corp. ("Range Permian Acquisition") announced on February 28, 2013. These estimates do not include any additional acquisitions of oil or natural gas properties. In addition, the expectations below assume Vanguard's current capital structure and does not contemplate any future equity or high yield bond offerings. Actual results for the year ended December 31, 2012 have been provided for comparative purposes.
FY 2013E | FY 2012 | ||||||||||||||||
Net Production: | |||||||||||||||||
Oil (Bbls/d) | 7,750 | - | 8,250 | 7,536 | |||||||||||||
Natural gas (Mcf/d) | 122,400 | - | 130,000 | 53,695 | |||||||||||||
Natural gas liquids (Bbls/d) | 3,200 | - | 3,400 | 1,813 | |||||||||||||
Total (BOE/d) | 31,350 | - | 33,317 | 18,298 | |||||||||||||
Costs per BOE: | |||||||||||||||||
Lease operating expenses | $8.25 | - | $9.25 | $11.10 | |||||||||||||
Production taxes (% of revenue) | 8.5% | - | 9.5% | 9.5% | |||||||||||||
G&A expenses | $1.25 | - | $1.75 | $2.34 | |||||||||||||
Depreciation, depletion and amortization | $12.25 | - | $13.25 | $15.61 | |||||||||||||
Cash Flow Calculation: | |||||||||||||||||
Adjusted EBITDA (1) | $302,500 | $230,512 | |||||||||||||||
Interest expense | (64,000) | (44,406) | |||||||||||||||
Maintenance capital expenditures (2): | |||||||||||||||||
Operated | (32,000) | (16,544) | |||||||||||||||
Non-operated | (23,000) | (33,861) | |||||||||||||||
Total maintenance capital expenditures | (55,000) | (50,405) | |||||||||||||||
Distributable cash flow (3) | $183,500 | $141,223 | |||||||||||||||
Mid-point distributable cash flow per unit | $2.69 | $2.60 | |||||||||||||||
Mid-point distribution coverage ratio (4) | 1.11x | 1.08x | |||||||||||||||
Mid-point adjusted net income per unit (1) | $1.20 | $1.18 | |||||||||||||||
Units outstanding (millions) | 68.3 | 54.4 | |||||||||||||||
Assumed NYMEX Pricing (February 28, 2013)(5): | Q1 2013 | Q2 - Q4 | FY 2012 | ||||||||||||||
Oil (Bbl) | $94.03 | $93.47 | $94.19 | ||||||||||||||
Natural gas (MMBtu) | $3.34 | $3.63 | $2.96 | ||||||||||||||
Average NYMEX Differentials: | |||||||||||||||||
Oil (Bbl) | $(13.85) | $(8.70) | $(9.66) | ||||||||||||||
Natural gas (MMBtu) | $(0.85) | $(0.90) | $(0.55) | ||||||||||||||
NGL realization of crude oil price (%) | 42% | 43% | 48% | ||||||||||||||
Maintenance Capital Expenditures: | Q1 2013 | Q2 2013 | Q3 2013 | Q4 2013 | |||||||||||||
Operated | $(5,000) | $(12,500) | $ | (8,500 | ) | $ | (6,000 | ) | |||||||||
Non-operated | $(4,500) | $(6,500) | $ | (3,000 | ) | $ | (9,000 | ) | |||||||||
(1) | Adjusted EBITDA and adjusted net income (non-GAAP financial measures defined below) exclude the amortization of value on derivative contracts acquired (approximately $30.0 MM for the FY 2013). | |
(2) | Additional detail regarding the maintenance capital breakout by quarter is listed below. Actual results for the year ended December 31, 2012 excludes the proceeds from the sale of leasehold interests. | |
(3) | Includes $5.5 million in proceeds from the sale of leasehold interests in 2012. | |
(4) | Assumes current monthly distribution rate of $0.2025 per unit for 2013 and no additional unit offerings. | |
(5) | NYMEX pricing includes actual settlements for 2013. |
Full Year 2012 Highlights:
The annualized monthly distribution of $2.43 per unit as of December 2012 represents a 5.2% increase over the annualized quarterly distribution of $2.31 per unit as of December 2011.
Record Adjusted EBITDA attributable to Vanguard unitholders (a non-GAAP financial measure defined below) increased 40% to $230.5 million from the $164.6 million generated in 2011.
Record Distributable Cash Flow attributable to Vanguard unitholders (a non-GAAP financial measure defined below) increased 28% to $141.2 million from the $110.1 million generated in 2011.
We reported net loss attributable to Vanguard unitholders for the year ended December 31, 2012 of $168.8 million or $(3.11) per basic unit compared to a net income of $62.1 million or $1.95 per basic unit in the year ended December 31, 2011. The 2012 results include net non-cash expenses of $232.9 million, the largest item of which is a $247.7 million impairment charge on our oil and natural gas properties. The 2011 results include non-cash expenses of $3.6 million and material transaction costs incurred on acquisitions and mergers of $2.0 million.
Adjusted Net Income attributable to Vanguard unitholders (a non-GAAP financial measure defined below) was $64.1 million in 2012, or $1.18 per unit, compared to Adjusted Net Income of $74.0 million, or $2.33 per unit, in 2011.
Reported average production of 18,298 BOE per day in 2012 was up 37% over 13,405 BOE per day produced in 2011. On a BOE basis, crude oil, natural gas and natural gas liquids ("NGLs") accounted for 41%, 49% and 10% of our production, respectively.
During 2012 we produced 19,652 MMcf of natural gas, an increase of 89% from the 10,413 MMcf of natural gas produced in 2011, 2,758 MBbls of oil, an increase of 1% from the 2,726 MBbls of oil produced in 2011, and 664 MBbls of NGLs, an increase of 54% from the 432 MBbls of NGLs produced in 2011.
Including the impact of our hedges this year, we realized a net price of $4.47 per Mcf on natural gas sales, $84.00 per Bbl on crude oil sales, and $45.11 per barrel on NGL sales, for an average sales price of $52.18 per BOE (all excluding amortization of premiums paid and amortization of value on derivative contracts acquired), which represents a 23% decline from the $67.70 average price per BOE realized in 2011.
Fourth Quarter 2012 Highlights:
Record Adjusted EBITDA attributable to Vanguard unitholders (a non-GAAP financial measure defined below) increased 24% to $66.5 from $53.5 million in the fourth quarter of 2011 and remains relatively flat compared to the $66.3 million recorded in the third quarter of 2012.
Distributable Cash Flow attributable to Vanguard unitholders (a non-GAAP financial measure defined below) increased 11% to $41.2 million from the $37.1 million generated in the fourth quarter of 2011 and increased 12% from the $36.6 million generated in the third quarter of 2012.
We reported a net loss attributable to Vanguard unitholders for the quarter of $201.5 million or $(3.41) per basic unit compared to a reported net loss of $15.2 million or $(0.42) per basic unit in the fourth quarter of 2011. The recent quarter includes net non-cash expenses of $217.5 million, the largest item of which is a $229.7 million impairment charge on our oil and gas properties. The fourth quarter of 2011 results includes net non-cash expenses of $69.7 million and material transaction costs incurred on acquisitions and mergers of $0.3 million.
Adjusted Net Income attributable to Vanguard unitholders (a non-GAAP financial measure defined below) was $16.0 million in the fourth quarter of 2012, or $0.27 per basic unit, as compared to $27.6 million, or $0.76 per basic unit, in the fourth quarter of 2011.
Reported average production of 22,803 BOE per day in the fourth quarter of 2012 was up 67% over 13,686 BOE per day produced in the fourth quarter of 2011 and a 6% decrease over third quarter of 2012. On a BOE basis, crude oil, natural gas and NGLs accounted for 33%, 57%, and 10% of our production, respectively.
During the quarter we produced 7,147 MMcf of natural gas, an increase of 173% from the 2,618 MMcf of natural gas produced in the fourth quarter of 2011, 697 MBbls of oil, an increase of 3% from the 675 MBbls of oil produced in the fourth quarter of 2011, and 210 MBbls of NGLs, an increase of 42% from the 148 MBbls of NGLs produced in the fourth quarter of 2011.
Including the impact of our natural gas hedges in the fourth quarter of 2012, we realized an average realized price of $4.19 per Mcf on natural gas sales, which is $1.82 per Mcf more than the unhedged realized average price of $2.37 per Mcf. Including the impact of our oil hedges, we realized an average price of $84.13 per barrel on crude oil sales, which is $3.15 per barrel more than the unhedged realized average price of $80.98 per barrel. The realized average price for our NGL production was $42.74 per barrel, which is a decline of 47%, when compared to the realized price in the fourth quarter of 2011.
Capital Expenditures
Capital expenditures for the drilling, capital workover and recompletion of oil and natural gas properties were approximately $10.1 million in the fourth quarter of 2012 compared to $10.4 million for the comparable quarter of 2011 and $16.9 million for the third quarter of 2012. Total capital expenditures for 2012 totaled $50.4 million, excluding the proceeds from the sale of leasehold interests.
Excluding the recently announced Range Permian Acquisition discussed below and any potential future acquisitions, we currently anticipate a capital budget for 2013 of approximately $55.0 million. Our capital budget will largely include drilling in the Arkoma Basin, Williston Basin and Big Horn Basin along with other maintenance related projects. Approximately $32.0 million, or 58% of the 2013 budget will be invested in operated projects, with the balance relying on the timing of the receipt of Authorization For Expenditures from our non-operated properties.
Recent Activities
On February 5, 2013, we completed a public offering of 9,200,000 of our common units at a price of $27.85 per unit. Offers were made pursuant to a prospectus supplement to the registration statement we filed in 2012. We received net proceeds of approximately $246.1 million, after deducting underwriting discounts of $10.0 million and offering costs of $0.1 million.
On February 26, 2013, we entered into a purchase and sale agreement to acquire natural gas, oil and NGLs properties in the Permian Basin in southeast New Mexico and West Texas for a purchase price of $275.0 million from Range Resources Corporation. We refer to this transaction as the Range Permian Acquisition. The effective date of the acquisition is January 1, 2013 and we anticipate closing this acquisition on or before April 1, 2013. We intend to fund this acquisition with borrowings under our existing reserve-based credit facility.
Hedging Activities
We enter into derivative transactions in the form of hedging arrangements to reduce the impact of oil and natural gas price volatility on our cash flow from operations. We have mitigated some of the volatility by implementing a hedging program for more than 90% of our anticipated production of crude oil through 2016 and more than 85% of our natural gas production through June 30, 2017. At December 31, 2012, the fair value of commodity derivative contracts was an asset of approximately $93.1 million, of which $44.5 million settles during the next twelve months. Currently, we use fixed-price swaps, basis swaps, swaptions, put spread options, collars, three-way collars and range bonus accumulators to hedge oil and natural gas prices.
New commodity derivative contracts put in place during the three months ended December 31, 2012 are as follows:
Year 2013 | Year 2014 | Year 2015 | Year 2016 | ||||||||||||||
Gas Positions: | |||||||||||||||||
Fixed Price Swaps | |||||||||||||||||
Notional Volume (MMBtu) | 15,330,000 | 14,235,000 | 16,060,000 | 14,640,000 | |||||||||||||
Fixed Price ($/MMBtu) | $ | 3.72 | $ | 4.01 | $ | 4.17 | $ | 4.37 | |||||||||
Oil Positions: | |||||||||||||||||
Fixed Price Swaps | |||||||||||||||||
Notional Volume (Bbls) | 438,000 | 255,500 | 73,000 | 73,200 | |||||||||||||
Fixed Price ($/Bbl) | $ | 89.52 | $ | 90.96 | $ | 87.10 | $ | 87.10 | |||||||||
Range Bonus Accumulators | |||||||||||||||||
Notional Volume (Bbls) | 547,500 | 365,000 | - | - | |||||||||||||
Bonus ($/Bbl) | $ | 3.67 | $ | 3.00 | $ | - | $ | - | |||||||||
Digital Call Sold ($/Bbl) | $ | 105.87 | $ | 110.00 | $ | - | $ | - | |||||||||
Put Sold ($/Bbl) | $ | 72.67 | $ | 70.00 | $ | - | $ | - | |||||||||
Additionally, we sold $70.00 puts for 365,000 Bbls of oil that settle during 2013 in order to raise the fixed-price on an existing oil swap contract.
During 2013, we have continued to layer in additional crude oil hedges, Midland-Cushing basis differential hedges, and for the first time have hedged a portion of our NGLs exposure through 2014.
For a summary of all commodity and interest rate derivati
